Over the years, AK Steel Corp. has cultivated the reputation of a feisty, independent company willing to take on unions, customers, even governors.

The steel maker's combativeness dominated when Chief Executive Richard Wardrop lashed out in early June at Gov. Bob Taft, who had just returned from a trade mission to Mexico.

Taft had accompanied an International Steel Group Inc. salesman to Lithonia Lighting in Monterrey.

What the governor didn't know was that ISG's rival, AK - based in Middletown, Ohio - already supplied Lithonia.

"It was inconsiderate and thoughtless for you to endorse a competitor's steel over ours," Wardrop wrote to Taft. "At the least, it shows a true lack of understanding and support for the men and women of AK Steel in Ohio . . ."

Taft pleaded ignorance, but that didn't stop Wardrop from bringing up the perceived slight in an open letter to employees and others published in several newspapers.

The CEO was already mad at the Taft administration for offering financial help to bankrupt competitors while in sisting that AK pay fines over pollution control.

AK's leaders had plenty of reasons to feel frustrated. The company had gone from leader to loser in less than two years. ISG, which didn't even exist two years ago, had become an industry model while acquiring bankrupt mills from LTV Corp. and Bethlehem Steel Corp.

AK's worst nightmare had come to life, said Christopher Plummer, director of Metal Strategies Inc. near Philadelphia - a lean, local competitor, without the pension and retiree health- care obligations AK still had.

Now AK, for so long the rogue bull, has veered back toward the pack. It's falling in line with ISG, whose leaders embrace organized labor and welcome government protection. And it's doing it without Wardrop, who resigned last month by mutual agreement with AK's board.

"The board simply believes that now is the time for a new perspective to address the company's current challenges," AK board member Robert Jenkins said in a written statement announcing the resignations of Wardrop and AK President John Hritz.

Fortunes sag The decline of AK and rise of LTV's old mills present a striking reversal of fortune.

At the end of 2001, LTV's mills were closed after a year under bankruptcy protection. ISG hadn't arrived on the scene. Like LTV, many other steel companies had been run into bankruptcy court or out of business altogether, by imports or their own bad management decisions.

AK Steel had few peers.

"We're sitting in the catbird seat," Wardrop told The Plain Dealer then. Wall Street analysts praised the focus on making high-quality steel, much of it sold through long-term contracts to automakers.

A shift toward such steel and away from products that compete strictly on price positioned AK to make money despite its relatively high costs. It used cheap foreign slabs to supplement its own production, turning them into high-quality products.

But it didn't take long for AK's business model to unravel, too. Higher prices for natural gas and scrap metal hurt the whole industry. So did depressed markets for steel, especially in the construction and industrial equipment industries, Plummer said, with the auto industry doing better but still off a record year in 2000.

Auto and light-truck production in North America dipped 10 percent in 2001, he said. It rebounded in 2002 but is expected to drop 5 percent to 16 million vehicles in 2003.

And AK sued General Motors Corp. last year. The steel maker insisted that GM fork over extra money to cover specific demands the automaker had made.

The two sides settled out of court, but it probably cost AK some business, said Christopher Olin, a steel analyst with Longbow Research in Independence, and it may prompt GM to drop AK next year when their contract expires.

"It's never a good idea to sue your largest customer," he said, ". . . especially one that constitutes over 20 percent of your total revenues."

Even worse, Olin said, Wardrop's willingness to feud over prices may have led to lost sales elsewhere with skittish customers.

Wardop could not be reached to comment on this story. AK spokesman Alan McCoy, however, said the steel maker has had a very good relationship with GM and expects that to continue. In general, he said, AK's auto business has remained steady.

A GM spokesman said AK remains an important supplier, but he would not speculate on the future of their contract.

It took a $500 million non- cash charge against earnings last year to account for a decline in the value of its pension plan and an increase in projected retiree benefit obligations.

This year, the company expects to dole out $139 million, mostly in cash, to cover health care costs, and to take another $92 million noncash hit for pensions.

That, with future retiree obligations, represents a cost of about $40 per ton.

ISG, meanwhile, has a cost ad vantage. When it completes a restructuring of Bethlehem operations within the next year, ISG's work force will number about 11,600 employees, including 1,500 at the former LTV works in Cleveland. Those numbers are down sharply from what the mills employed before ISG. And because the government took over pension costs for past retirees while bankruptcies wiped out obligations for retiree health care, ISG doesn't have AK's so- called legacy costs.

The Richfield-based company recently restarted its second blast furnace in Cleveland as demand for its steel improved. ISG has grown so confident that it plans to go public in the near future with an initial offering of stock.

CEO Rodney Mott brushes off suggestions that ISG has all the answers. There's still a lot to prove, he said. "Everybody has their turn of being the guy that Wall Street likes," Mott said, ". . . and maybe now it's us."

Union help Analysts say there's something more going on than being charmed by the new kid on the block. The consolidation, the growth, the IPO - none of that would have been possible without the cooperation of the United Steelworkers of America.

"I think ISG is the model in terms of how you want your labor contract structured," Olin said. It provides staffing flexibility to enhance efficiency - for example, a worker who just pushed buttons and twisted levers to run steel through a rolling mill under LTV is now also expected to grease the mill's motors and bearings during down time. The union likes the contract because it gives the workers more say in how they do their jobs.

The contract also limits pension exposure by offering to make periodic contributions to employee accounts rather than promising to pay a set amount in retirement.

AK, for its part, is still a model of plant efficiency, Olin said. Part of its strategy - buying foreign slabs to supplement domestic production - is sound economics. But "the labor side is what killed AK," he said.

If AK is to survive, analysts believe, it needs the kind of agreements ISG and U.S. Steel Corp. have.

Mott and ISG Chairman Wilbur Ross said from the beginning that Steelworker cooperation would be essential. AK's combative relationship with the Steelworkers, on the other hand, makes a Mike Tyson-Lennox Lewis fight seem tame.

The USWA represents only about 10 percent of AK's employees, but it's the most contentious of the five unions that have contracts with the steel maker.

In 1999, one of AK's predecessor companies, Armco Inc., locked out the Steelworkers at its Mansfield plant. The standoff lasted more than 39 months. AK brought in replacement workers; the battle turned violent.

Last November, a Cleveland jury ordered the Steelworkers to pay $4.3 million to AK for union members' actions before the lockout. The workers had refused to work overtime and committed sabotage to slow production.

The USWA had its own complaints about AK, and the ill will hurt when the company tried to buy National Steel Corp. mills out of bankruptcy court earlier this year. It couldn't get Steelworker cooperation; eventual buyer U.S. Steel could - and it got National without having to take on retiree benefits.

The departure of Wardrop and Hritz may pave the way for more amicable labor talks. "The old management under Wardrop was just heading for a train wreck," steel analyst Mike Locker said. ". . . He didn't know how to negotiate. He knew how to dominate."

While AK has had its differences with the Steelworkers at Mansfield, both sides are taking steps to "resolve our issues," said McCoy, who added that relations with the Steelworkers at the company's Ashland, Ky., plant have been good.

Already, acting CEO James Wainscott has met with leaders of the Steelworkers to mend fences, and the union has made statements that suggest a willingness to cooperate. Retiree benefit costs will be at the top of the agenda.

"That's a significant obstacle that we need to find out a way to overcome," McCoy said.

50-50 chance Better relations with the Steelworkers are part of what looks like a broad change in the old, tough AK. Wainscott has even called Taft to make nice.

But while AK tries to solve its problems, analysts believe the company is being shopped around or could file for bankruptcy protection. It wouldn't be alone. Last week, another local steel company, Republic Engineered Products LLC based in Fairlawn, became the 41st U.S. steel company to go into bankruptcy court since 1997, according to USWA records.

Steel analyst Chuck Bradford gives AK Steel a 50-50 chance of remaining independent and outside of bankruptcy court. He figures there's a 25 percent chance the company will be sold. The remaining alternative: Chapter 11. The company says bankruptcy is not an option it's considering.

AK has said it may close its Middletown blast furnace and basic oxygen furnaces, which would affect about 1,000 workers. That would leave the company with about 9,000 workers - and would mean it would need even more foreign slabs.

A Brazilian slab maker is one of several companies, foreign and domestic, that are considered potential buyers. Mott has said ISG has not talked with AK about acquiring any of its operations.

The upstart might be excused for taking a pass, given that its part in the role reversal of Ohio steel isn't secure. ISG expects depressed summer steel prices to produce dismal third-quarter results. Standard & Poor's Ratings Services, which evaluates creditworthiness, has questioned whether ISG will complete its stock offering this year.

Mott, while confident that his business model will work, refuses to beat his chest over his company's accomplishments.